CPA, ABA, CFP – Which Credentials Matter?

When choosing a professional to help you file your income taxes – whether you are an individual or are running a small business – choosing the tax accountant with the right credentials is key. Flipping through the phone book or browsing through online business listings, you’ll likely encounter a veritable alphabet soup of acronyms such as CPA, CFA, CFP, CMA, ABA and others. In fact, there are upwards of 46 different acronyms that relate to certifications in accounting, finance and business. Of these accountant credentials, you’re most likely to retain a CPA, ABA or CFP. Here’s what each means:

Certified Public Accountants (CPA)

CPAs are most well known for preparing taxes, but they can also advise you on how to structure your small business and setup a bookkeeping system as well as help you plan for retirement, college and organizing your estate. CPAs must undergo rigorous testing and continuing education to maintain their licenses. This means accountants who are CPAs are highly qualified with up-to-date knowledge of the latest tax laws in their local area. That means a CPA operating in Seattle or Bellevue is required to be well-versed in both federal tax law and Washington state tax law.

Accredited Business Accountant (ABA)

An ABA is an accountant who has undergone additional training and has passed the Accreditation Council for Accountancy and Taxation (ACAT) exam. This is a voluntary accreditation and is meant to signify that this accountant specializes in accounting services for individuals and small- to medium-sized businesses.

Certified Financial Planner (CFP)

A CFP can help you with your investment goals. CFPs are a good choice if you are planning for the future, as they can offer a broad range of financial advice. So,which financial professional should you choose? That all depends. Are you looking to file your individual income taxes? Are you starting a small business? Or are you trying to build a reliable investment portfolio for the next 30 years? Different professionals serve different needs.

The best way to determine whether a financial advisor is a good fit for your needs is to schedule an interview or consultation. Many accounting firms have multiple specialties that work in conjunction to serve your needs. For example, some CPA firms also offer business consulting for small businesses and can help you set up a QuickBooks accounting system or provide advice on how to incorporate your independently owned business. So, take your time and interview at least three different accountants before deciding which one works best for you.

Accountants: Are There Differences Between CPA Firms and Accounting Firms?

Whether you’re a business owner or an individual taxpayer, having an experienced, knowledgeable accountant available for tax return help or dealing with IRS tax problems is vitally important. It can mean the difference between avoiding major tax problems and getting buried by them. However, it’s critical to make sure you know who you’re turning to for tax help, as not all accountants are created equal. There are major differences between CPA firms and accounting firms, so read on to learn more.

Although there are many capable accounting firms that can help you with everything from small business bookkeeping services to filing tax returns, it’s often advisable to seek out tax help from CPA firms. Depending on the complexity of your tax and financial situation, there may be some solid advantages to choosing CPA services instead of ordinary tax and accounting services. When you need an experienced tax advocate, representation at IRS audits, or help with complex tax issues, the additional training and expertise that a CPA offers can make all the difference in the resolution of your tax problems.

Surprisingly, in many states, anyone can refer to themselves as an “accountant” without having any special education, certification, or experience. That’s why it can be somewhat risky to hire an accounting company or┬átax accountant who has not taken and passed the rigorous Uniform CPA Examination. In order to be granted a CPA license by a state board of accountancy, a CPA candidate also needs to earn a college degree in accounting, gain professional work experience in public accounting, and demonstrate high ethical standards. Unlike many accounting firms, CPA firms are qualified to negotiate an IRS tax settlement, help clients obtain tax debt relief, and prepare effective offers in compromise.

With expertise in everything from business valuations and financial reporting to negotiating the release of wage garnishments and IRS tax liens, CPA firms are usually the type of tax consultants you can place the most confidence in. In addition to meticulous tax return preparation and financial planning guidance, many CPA firms can provide valuable help in securing IRS installment agreements, penalty abatement, innocent spouse relief claims, and IRS tax settlements. While there’s no blanket guarantee that all CPAs are beyond reproach, CPA certification is usually an indication that you’re receiving tax advice from a meticulous and knowledgeable professional.

If you’re among the minority of taxpayers who do not own real estate, claim tax deductions, have investment income, or ever encounter tax issues of any kind, then it might not be necessary to hire a CPA. For example, a young, single professional who does not have any dependents, assets, or deductible expenses may be able to handle his or her own income tax preparation and planning without too much difficulty. As his or her career, business, or financial situation moves forward, however, the services of a competent accounting company or tax accountant often become an essential part of financial management.

When it comes to accounting professionals, understanding the difference between a CPA firm and an accounting firm can make sure you get the services you need for your specific situation.

How to Start a Tax Accounting and CPA Firm

Having gained considerable experience developing five of my own accounting practices and spending the next two decades individually assisting over 2000 accountants develop their own practices, there are a few basic principles accountants can observe to provide themselves the greatest opportunity for success.

The best way for accountants to succeed in starting their own Accounting and Tax CPA practice is by providing themselves with the greatest opportunity for that success. This can be done by remembering that the basic principles for a successful practice are good clients together with the basic tools to service them. Many accountants seeking to develop their own practice position themselves with large amounts of unnecessary overhead undermining their opportunity for success. Unnecessary costs can be deferred until they become necessary. Obtain only necessary items to service the initial clients. It is important to keep the initial overhead as low as possible to create a positive cash flow quickly to finance the development of the practice.

When starting an Accounting and Tax CPA Firm, it is recommended that accountants start from their home. In today’s technological world, clients are very accepting to accountants working out of their homes. In some respect, it provides the clients with the perception that they are receiving a greater value. They feel if the accountant is incurring less overhead, perhaps part of the savings is being passed on to the clients. By saving the cost of rent and other office expenses, accountants will accelerate their positive cash flow, which may be used for financing the expansion of the practice without going into debt. Once the cash flow is sufficient to support an office, then the accountant can decide if expansion into an office is warranted. Accountants who do work from home may also find they enjoy it so much that they may choose to forgo moving to an outside office.

Another way accountants can maintain a low overhead is by avoiding unnecessary costly software. Numerous accountants procure very expensive unnecessary software to support clients they have yet to develop. There are extremely good software companies that provide an excellent product at a low to medium price range. Drake Tax Software is a very cost-efficient software program that has an excellent reputation. In the September 2011 edition of The Journal of Accountancy, the results of a software survey were published, and Drake Tax Software received an excellent score. Accountants who are starting their own Accounting & Tax CPA Firm are encouraged to pursue good software at affordable prices giving them the basic tools to service clients.

There are many other simple ways accountants starting their own Tax and Accounting Firm can reduce startup costs. Simply the name that accountants decide on for their firms will reduce their initial costs. If accountants would use their first name, middle initial, and last name followed by CPA and/or Certified public Accountant, they may avoid DBA registration costs, bank charges, and filing fees. In addition, active licensed Certified Public Accountants have legal rights to practice public accounting under their own names saving them costs associated with fictitious names. Many times, Certified Public Accountants can choose fictitious names, which would diminish potential clients’ perceptions of them, which in turn would impede a start-up business. For example, a licensed Certified Public Accountant doing business as “Bay City Tax Service” or “Accounting & Tax Service” loses credibility. Prospective clients may perceive this company as uncertified and unlicensed.

Accountants who are considering developing an Accounting/CPA practice and who are currently employed are encouraged not to terminate their employment in pursuit of starting their own Accounting & Tax CPA Firm. Instead, they should develop their practice concurrently while still employed. This can be a time-demanding decision when compared to terminating their employment and devoting full time to their practice; however, the sacrifice is well worth the reward. As the practice grows, accountants can grow with it and transition themselves full-time into their own practice without placing unnecessary financial pressure on themselves or on their families.

With the relief of financial pressure while operating the new practice concurrently with employment, there will be a substantial boost in income without incurring large expenses. Cash reserves will substantially increase as employment income is maintained, and new income will begin to flow in from the new practice as well. This increase in cash reserves will be of great assistance in financing a full-time transition, and this will make the move go more smoothly when the time comes

In making that move to a full-time practice, accountants will find it easiest to transition full-time into their own practice in the month of January. January is the beginning of tax season, and along with it comes the beginning of revenue from income tax preparation. The increase in revenue will come right at the time the accountants need it the very most. It is important that accountants position themselves to begin marketing at the start of tax season to aggressively develop individual tax clients taking full advantage of their first tax season. In addition, January encompasses year-end work for many businesses, such as payroll and financial reporting. This will also add additional revenue to the accountants’ practices in the month of their transition.

January is also the best month of the year to transition full-time into the practice because it may be the best month of the year for developing new businesses as clients. Most business owners resist changing accountants. It takes a very solid reason for a client to leave a predecessor accountant. Once a client makes the decision to change, usually he or she will not invoke the change until the end of the business year not desiring to have two accountants split a fiscal year. Accordingly, year-end is the most opportune time for approaching business owners, and it will make the transition into the full-time practice easier.

Finally, when starting an Accounting and Tax CPA Firm, it is important to avoid marketing services as a commodity or product. This often leads to very low response and low quality of clientele. It also can be extremely expensive. There are volumes of accountants who pursue very expensive marketing programs offered by various companies and who are lured by difficult-to-enforce guarantees. Many of these programs are commodity driven. The accounting industry is not commodity driven; it is driven by trust and loyalty. An accountant’s marketing campaign must be driven by truth, honesty, and professionalism, which will enable a client to be more comfortable knowing that he or she is hiring an accountant who can be trusted.

Accountant or CPAs who are currently employed and seeking to start their own Accounting and Tax CPA firms will find it beneficial to pursue the practice by following some very simple steps:

1) Avoid unnecessary costs and expenses.

2) Consider starting the accounting CPA Practice from home.

3) Develop the practice alongside current employment.

4) Avoid marketing the firm as a commodity or product.

Remember, opportunity starts with action. No action, no opportunity. Accountants who take action provide themselves with the opportunity to succeed. They should start their own CPA and Accounting Firms from home while employed. Their successful experience without jeopardizing their future will provide them the confidence and cash flow they need to enjoy the freedoms in ownership of an Accounting and Tax CPA Firm.